How to Compute Fair Market Value
Fair market value is described by InvestorWords.com as the price a non-desperate buyer would pay and that a non-desperate seller would accept in an open market. There is no set formula or algorithm to determine the fair market value of an item. Instead, fair market value must be computed on a case-by-case basis, taking into account the individual market conditions for each item. The best way to compute fair market value for an item is to calculate it using different methods and then take the average of those values.
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Instructions
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Use a value guidebook for the item, if one exists. For example, Kelly Blue Book can be used for cars, and various sports memorabilia guidebooks are available in bookstores.
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Determine the original selling price of the item, so that you have a starting point. If you have a receipt, use it. Otherwise, look for places that sell the item or a similar item new.
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Look for comparable items in the market to see their selling price. If the item is used, look in a local consignment store, antique store or another appropriate store. Ebay and Craigslist.org are also good places to look for similar items. For real estate, look at recent home sales on Zillow.com.
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Consult with industry experts on the item that you are trying to value. For example, ask an appraiser for the value of real estate or antiques. The Appraisal Institute website can help to locate the nearest appraiser. A link to the institute is provided in the Resources section.
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Take the values that you have gotten and add them all together, then calculate the average. This will be a fair representation of the fair market value of the item.
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